E85: The ethanol blend appears to be stalling

  • Article by: PAT DOYLE , Star Tribune
  • Updated: August 9, 2008 - 9:53 PM

Gov. Pawlenty's goal of having 1,800 Minnesota gas stations sell E85 fuel by 2010 seems out of reach.

It was announced with fanfare -- Gov. Tim Pawlenty's plan in 2006 to make highly concentrated ethanol fuel available "everywhere" in Minnesota within a few years to reduce gasoline consumption.

But now, with gas prices a torrid issue for voters, the number of Minnesota service stations installing pumps for E85, a blend of 85 percent ethanol and 15 percent gasoline, is far off the pace needed to reach the goal set by Pawlenty.

In a recent interview, the governor tempered his longstanding enthusiasm for corn-based ethanol, a politically potent product in a farm state, but one also blamed for increases in the cost of food.

Tepid consumer demand and perceived roadblocks to wider access to the fuel have been cited as reasons why many station owners are reticent to install E85 pumps, despite the incentive of state subsidies. The shortcomings demonstrate the fragility of any bold predictions on energy.

"That's kind of one of the things politicians do," said Robert Moffitt, a spokesman for the American Lung Association of Minnesota, which helps run the E85 program. "They set lofty goals, aim-at-the-stars type of thing."

To be sure, E85 use continues to rise in Minnesota, where it has long been far more popular than in any other state. Flex-fuel cars, which can run on gasoline or E85, are increasing. And when gas prices are high, owners of flex-fuel vehicles have more of an incentive to buy E85, which can cost 75 cents less per gallon than gas.

But vehicles running on E85 get lower fuel economy than when powered by gasoline, reducing or eliminating the savings from buying the blend. Some drivers report that running on E85 can cost more than running on gas.

The growth in E85 sales in Minnesota has slowed dramatically since Pawlenty announced his push for its expansion, even as gas prices spiked. While sales more than doubled from 2005 to 2006, they increased by only 20 percent in 2007, a year when the state began offering $1.75 million in subsidies to station operators to help offset the cost of installing E85 pumps. Monthly sales are up by about 12 percent so far this year from last year.

Pawlenty's goal in 2006 was to have 1,800 E85 stations in Minnesota by 2010, a strategy aimed at making the blend accessible throughout the state. There were 287 stations that offered E85 pumps at the end of 2006.

Today there are 348. About $1 million in subsidies has gone unclaimed.

The governor had proposed $12 million in subsidies. Pawlenty spokesman Brian McClung said the Legislature favored less aid.

Most service-station owners remain uncertain about E85's prospects, said Lance Klatt, executive director of the Minnesota Service Station Association.

"They're waiting to see what ethanol really's going to do," he said. "Is it really the future, or is hydrogen the future? They don't want to invest a lot of money and time in something that may be a fad."

There's no sure answer for the owners of T&M Express, which installed E85 pumps in 2007 at stations in Nevis and Park Rapids. E85 volume has increased from 1 percent to 2 percent of their sales.

"People just don't have the vehicles for it," said Nancy Lewis, who manages the stores for her parents.

Some E85 supporters detect a chicken-and-egg problem.

"The automakers are reluctant to promote flex-fuel vehicles in areas where there are no E85 pumps, and gas stations don't want to put in E85 pumps where there are no flex-fuel vehicles," Sen. Amy Klobuchar testified at a 2007 congressional hearing.

Klobuchar, D-Minn., also said some franchise gas stations have complained that oil-company contracts bar them from selling renewable fuels from the main canopy that bears an oil company's brand name, or converting existing gas pumps to E85. She backed legislation passed last year that bans the continuation of such restrictions in future contracts.

American Petroleum Institute spokeswoman Karen Matusic said, "We are unaware of any company that has told any gas-station owner they cannot switch to E85." Matusic added that the Environmental Protection Agency recently advised that separating E85 from gas pumps could help prevent its use in vehicles not built for it.

The blend became a prominent political issue before Pawlenty called for its expansion as part of his "Next Generation Energy Initiative" announced in December 2006.

In the 2006 election, the DFL candidate for lieutenant governor, Judi Dutcher, committed a gaffe when asked about the ethanol blend: she said, "Can't even comment on it, I'm sorry. It's like you've asked me the college quiz bowl question: What is E85?"

Her unfamiliarity with E85 was believed to have cost Dutcher and her running mate, Mike Hatch, votes in rural areas where E85 is popular among farmers who grow corn used in it. Pawlenty exploited the mistake, declaring that Dutcher was "unaware of one of the most important issues and economic tools for all of Greater Minnesota."

In a recent interview, Pawlenty said that corn-based ethanol will continue to be important, but that there will be increasing emphasis on developing ethanol that doesn't rely on the food crop, but on waste products such as wood.

"As with all technology, it's going to evolve," he said. "We're simply moving from Phase One to Phase Two."

Staff writer Patricia Lopez contributed to this story.

Pat Doyle • 651-222-1210

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